TARP watch: bailout FAILOUT

Negotiators had worked all weekend to accommodate some of the doubts of conservative Republicans who objected to such a massive outlay of taxpayer funds on the financial sector. But in the end the largely superficial changes made to the original plan were not enough and more than three-quarters of Republicans voted against. Worse, perhaps, more than a third of Democrats also opposed the measure, which they saw as a handout to rich bankers on Wall Street.

Now, in effect, the politicians have called the bluff of Hank Paulson, the US Treasury Secretary. Since he first proposed the plan ten days ago he has repeatedly warned that its passage was absolutely essential to avoid a complete freezing-up of the US financial system.

I’m frankly surprised – I thought the Congresscritters would reluctantly fall into line. If this crisis has done one good thing, it’s put the phrase “corporate welfare” right at the top of the public vocabulary; a year ago only leftists ever used it and decried it, while fiscal conservatives denied the existence of such a thing. Perhaps a few more of the special provisions that concentrate wealth in the virtual hands of corporations might be more deeply examined now (not holding my breath though).

So what happens now? My guess is that, eventually, this will mean a sounder package to protect the US taxpayers (and the rest of the global economy) from the worst effects of the Wall Street meltdown, and that the top execs will have to take a deep breath and forgo those golden parachutes (although that should be a secondary consideration, they don’t deserve them when they’ve led the way to such a mess). But while that sounder package is being hammered out, the stock market will continue to dive and anxiety will rise and rise. They can’t take too long to sort something out.

3 replies

Cutting and pasting this comment from my crosspost over at LP:
This result is certainly not going to help McCain’s credibility: he suspended his campaign allegedly to ensure that House Republicans passed this bill, and they’ve basically given him the finger. John Aravosis:

McCain returned to Washington to get a deal and get House Republicans on board. We got the deal, even though McCain stayed home and then went to dinner with Lieberman instead of joining the actual negotiators on the Hill, and then when the vote came up today, the majority of Republicans voted against the bill and killed it. The majority of Democrats voted for the bill. Had the majority of Republicans done the same, it would have passed. John McCain supported this bill, then why was he unsuccessful in getting House Republicans to join? Why? Because they hate him. All the Republicans hate McCain. McCain isn’t a maverick as much as he’s a loner. People don’t like him. And the canard that he was going to somehow bring everyone together in a bipartisan manner was, well, just that, a joke. And today we saw the extent of McCain’s great powers to bring people together. McCain crash landed into Washington and blew up the talks. Then he failed to deliver when he promised he could get his party on board. John McCain was just tested, and failed.

I’m really pleased about this – this bill was ridiculous. Congress represented their constituents rather than special interest groups (aka very, very rich people) as they should. Maybe now a stronger, better bill can be hammered out, which involves actual regulation and oversight – perhaps even a schedule for Wall Street to pay it back.

The possibility of a stronger, better bill is encouraging, but they really should not take too long. It’s getting to the stage where at least some portion of the projected TARP funds need to be released and used, may be 100-150billion, and keep back the rest for better legislation in January when the new reps take their seats under a new presidency.
The blame game now going on for the fail-out is pretty far-fetched:

In the speech that Republicans said infuriated them, Ms. Pelosi accused Mr. Bush of squandering the budget surpluses of the Clinton years. “They claim to be free-market advocates, when it’s really an anything-goes mentality,” she said. “No supervision. No discipline. And if you fail, you will have a golden parachute and the taxpayer will bail you out.”
Democrats later said that if her speech truly cost votes, then Republicans, in the words of Representative Barney Frank, Democrat of Massachusetts, were guilty of punishing the country because Ms. Pelosi had hurt their feelings.

Frank also said that he thought this attempted justification was really just an excuse for the Republicans never having the numbers behind the bill that they originally claimed.